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Lightspeed Announces Fourth Quarter and Full Year 2020 Financial Results

[May 21, 2020]

Lightspeed Announces Fourth Quarter and Full Year 2020 Financial Results

Fourth Quarter Revenue Growth Accelerated to 70% YoY

Record adoption of Lightspeed eCommerce and Lightspeed Delivery to Power Customers' Omni-channel Needs

Over 60% of eligible new customers contracted for Lightspeed Payments

Average GTV processed by a Lightspeed customer is now >$600,000 per annum

Lightspeed reports in U.S. dollars and in accordance with IFRS.

MONTREAL, May 21, 2020 /CNW Telbec/ - Lightspeed POS Inc. ("Lightspeed" or the "Company") (TSX: LSPD), a leading provider of omni-channel point of sale platforms, today announced financial results for the three- and twelve-month periods ended March 31, 2020.

In the month of March, Lightspeed saw record uptake of Lightspeed eCommerce, Lightspeed Delivery and Lightspeed Payments platforms as retailers and hospitality businesses worldwide adopted new sales channels to continue reaching customers amidst the outbreak of COVID-19. The need for an omni-channel cloud solution coupled with modern, integrated payment solutions is no longer a competitive differentiator, but a business imperative.

"We are witnessing a historic shift in the way small and medium-sized businesses, the businesses at the heart of our communities, engage in commerce. Being omni-channel has never been more important." said Dax Dasilva, Lightspeed Founder and CEO. "Our merchants are progressive, omni-channel thought-leaders that continuously reinvent the retail and hospitality landscapes. We are proud to be their key technology partner and are committed to powering their growth."

As the implications of the pandemic became clearer in March, Lightspeed swiftly transitioned staff worldwide to remote work and immediately rolled out initiatives designed to support merchants during this unprecedented time, including:

Affordable access to solutions, such as Lightspeed eCommerce, Lightspeed Delivery, Lightspeed Loyalty and Lightspeed Payments, to help merchants optimize their business models to continue reaching consumers.

Staff deployments to support the immediate onboarding of record numbers of merchants seeking overnight adoption of digital sales channels.

Strategic private and municipal partnerships to extend discounted solutions to communities in need of rapid transformation.

The #lightspeedlocal initiative, which reimburses employees who shop through e-commerce or dine takeout or delivery from their local Lightspeed retailers and restaurants, a tangible method of enabling the global workforce to support small business.

"We delivered strong financial results to finish up our fiscal year, despite the difficult macro environment encountered through the back half of March," said Brandon Nussey, Lightspeed's CFO. "While the effects of COVID-19 will cause some uncertainty for the foreseeable future, we are encouraged by the signs we are seeing for Lightspeed's solutions and what it signals for our long-term potential. With over $210 million in unrestricted cash we are well positioned to invest smartly through this period and emerge as an even stronger global leader for our customers."

Fourth Quarter Financial Highlights

(All comparisons are relative to the three-month period ended March 31, 2019 unless otherwise stated):

Total revenue of $36.3 million, an increase of 70%

Recurring software and payments revenue of $31.8 million, an increase of 70%

Gross margin of 63%, with gross profit up by 58% versus the prior year quarter

Net loss of $18.6 million as compared to a net loss of $96.1 million. Last year's results were impacted by a non-cash charge of $132.1 million, offset by an associated $44.8 million deferred tax benefit, each related to our preferred shares which converted into common shares prior to our IPO

At March 31, 2020, Lightspeed had $210 million in unrestricted cash and cash equivalents, with additional borrowing capacity of $25 million

Full Fiscal Year Financial Highlights

(All comparisons are relative to the full fiscal year ended 2019 unless otherwise stated):

Total revenue of $120.6 million, an increase of 56%

Recurring software and payments revenue of $106.9 million, an increase of 56%

Gross margin of 64% with gross profit up by 44% versus the prior year

Net loss of $53.5 million as compared to a net loss of $183.5 million. Last year's results were impacted by a non-cash charge of $191.2 million, offset by an associated $30.8 million deferred tax benefit, each related to our preferred shares which converted into common shares prior to our IPO

Adjusted EBITDA of ($21.7) million compared to Adjusted EBITDA of ($13.1) million

1

Non-IFRS measure. See "Non-IFRS Measures" and the reconciliation to the most directly comparable IFRS measure included in this news release.

2

Key Performance Indicator. See "Key Performance Indicators

Operational and Business Highlights

(All comparisons are relative to the full fiscal year ended 2019 unless otherwise stated):

Lightspeed powered approximately 76,500 customer locations2 worldwide as of March 31, 2020, an increase from 49,000 a year prior.

The number of customers (excluding customers from its three most recent acquisitions) using more than one Lightspeed module grew from 33% at March 31, 2019 to 40% at March 31, 2020 led in part by strong recent adoption of Lightspeed eCommerce to power online stores for customers, Lightspeed Delivery to better enable hospitality customers to launch home delivery offerings, Lightspeed Loyalty to help customers stay in touch with their patrons across multiple selling channels, and Lightspeed Payments to help merchants save time and money and streamline their operations.

Lightspeed's platforms enabled retailers such as Out There Outfitters, in business for more than 25 years, to quickly establish an online presence and enable curbside pick-up to drive sales and remain connected to their community. Similarly, Montréal-based Editorial Boutique rapidly designed a pop-up Lightspeed eCommerce site, complemented by virtual sessions with in-store stylists, allowing boutique employees to deliver highly personalized recommendations to customers. London-based hospitality merchant Absurd Bird used Lightspeed to strategically redesign menus in its six brick-and-mortar locations in bulk and alter its kitchen layouts to be more delivery-friendly, while Ratcliffe Golf Services, based in North Carolina, used online booking to eliminate points of contact and keep courses operational.

GTV2 processed by retailers and hospitality businesses on Lightspeed platforms grew by more than 70% to over $6.1 billion in the three-month period ended March 31, 2020 and to over $22.3 billion for the twelve-month period ended March 31, 2020. The average GTV processed by a Lightspeed customer is now >$600,000 per annum.

The portion of customers contracting for Lightspeed Payments alongside their core software subscription increased again this quarter, eclipsing 60%. A record number of existing customers agreed to switch to Lightspeed Payments as well.

Ongoing success of Lightspeed's omni-channel cloud offering to mid-market customers and with a new team dedicated to that effort. Lightspeed's solutions have proven capabilities in serving multi-location customers, including the newly-signed Palmetto Dunes Oceanfront Resort, a golf experience located on Hilton Head Island, South Carolina and the Houston-based fashion and accessories retailer Charming Charlie, who chose Lightspeed Retail, Lightspeed Analytics and Lightspeed Loyalty for its 15 locations across the United States.

Released the latest Lightspeed Restaurant solution across Europe with advancements around reporting and analytics, multi-location management, centralized menu management, and new mobile capabilities

In late February, Lightspeed raised $130 million in capital through a bought deal offering.

Subsequent to Fourth Quarter

The effects of the COVID-19 pandemic and related government shutdowns are impacting retailers and restaurants globally. We anticipate that customers' GTV and the demand for our services will be impacted and business failures in our customer base will increase so long as social distancing measures remain in place in the core markets we serve.

However, Lightspeed's solutions have been helping to offset the toll that the pandemic is taking on hospitality and retail industries around the world. The following trends have been apparent since the quarter end:

As of today, despite present economic conditions, approximately three-quarters of Lightspeed's customers are actively trading, meaning that they are processing volume through Lightspeed's omni-channel cloud solutions.

eCommerce adoption remains robust with a 400% increase in eCommerce volumes processed by Lightspeed retailers in April as compared to February 2020 levels.

Overall GTV from Lightspeed retailers in April grew approximately 50% from March 2020 levels.

Lightspeed Payments revenue had a record month in April, led by increased online sales, the impact of new customer adoption, and good performance across a subset of verticals such as home and garden, bike and pet.

Hospitality customer volumes remain challenged due to the ongoing government mandated shutdowns affecting most markets. Lightspeed's hospitality revenue base is mainly subscription software revenue that is not variable to underlying customer volumes, with the largest concentration in countries like Australia, Germany, Belgium, Switzerland, the UK, and France.

The number of hospitality customers now using home delivery and curbside pickup options has increased sharply. In Australia, for example, there has been 5x the volume through these channels versus a year ago.

New customer demand was encouraging through April with new retailers, golf courses, restaurants and mid market opportunities all choosing Lightspeed solutions. While churn and customers on reduced subscription plans remained elevated compared to historical norms, Lightspeed ended April with approximately 75,500 customer locations subscribed to Lightspeed solutions.

Financial Outlook

Heightened uncertainty in the global economy is having an acute impact on everyone, including our customers, their consumers, our partners, our suppliers and our employees. The degree to which COVID-19 will affect our business, operating results and financial condition in upcoming quarters will depend on future developments that are highly uncertain and cannot currently be predicted. As such, Lightspeed is declining to provide a financial outlook at this time for both the quarter ending June 30, 2020 and the full year ending March 31, 2021. Above, however, we have given insight into trends we are witnessing in our business through April. In response to the present uncertainty, we have strategically re-directed discretionary spending and funding for certain go-to-market initiatives towards solution innovation. We believe we are witnessing an urgent and lasting paradigm shift in the needs of small and medium-sized retail and hospitality businesses and we believe strong fundamentals, including our broad omni-channel cloud solution set, geographically-diverse customer base balanced between retail and hospitality, subscription-based software business model, compelling payments offering, and strong balance sheet, position us well to capitalize on this shift.

Conference Call and Webcast Information

Lightspeed will host a conference call and webcast to discuss the Company's financial results at 8:30 am ET on Thursday, May 21, 2020. To access the conference call, dial 866.211.3060 for the U.S. or Canada, or 647.689.6576 for international callers and provide conference ID 9369136 or "Lightspeed". The webcast will be available live on the Investors section of the Company's website at https://investors.lightspeedhq.com.

An audio replay of the call will also be available to investors beginning at approximately 11:00 a.m. Eastern Time on May 21, 2020, until 11:59 p.m. Eastern Time on May 28, 2020, by dialing 800.585.8367 for the U.S. or Canada, or 416.621.4642 for international callers and provide conference ID 9369136. In addition, an archived webcast will be available on the Investors section of the Company's website at https://investors.lightspeedhq.com.

About Lightspeed

Lightspeed (TSX: LSPD) powers small and medium-sized businesses with its cloud-based, omni-channel commerce platforms in over 100 countries around the world. With smart, scalable, and dependable point of sale systems, Lightspeed provides all-in-one solutions that help restaurants and retailers sell across channels, manage operations, engage with consumers, accept payments, and grow their business.

Headquartered in Montréal, Canada, Lightspeed is trusted by favorite local businesses, where the community goes to shop and dine. Lightspeed has offices in Canada, USA, Europe, and Australia.

The information presented herein includes certain financial measures such as "Adjusted EBITDA", "non-IFRS Gross Profit", "non-IFRS general and administrative expenses", "non-IFRS research and development expenses", and "non-IFRS sales and marketing expenses". These measures are not recognized measures under IFRS and do not have a standardized meaning prescribed by IFRS and are therefore unlikely to be comparable to similar measures presented by other companies. Rather, these measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective. Accordingly, these measures should not be considered in isolation nor as a substitute for analysis of our financial information reported under IFRS. These non-IFRS measures are used to provide investors with supplemental measures of our operating performance and thus may highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. We also believe that securities analysts, investors and other interested parties frequently use non-IFRS measures in the evaluation of issuers. Our management also uses non-IFRS measures in order to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation.

Non-IFRS gross profit, non-IFRS general and administrative expenses, non-IFRS research and development expenses, and non-IFRS sales and marketing expenses are non-IFRS financial measures that exclude the effect of stock-based compensation expense and related payroll taxes, and in the case of non-IFRS general and administrative expenses and non-IFRS sales and marketing expenses, transaction-related costs.

We monitor the following key performance indicators to help us evaluate our business, measure our performance, identify trends affecting our business, formulate business plans and make strategic decisions. Our key performance indicators may be calculated in a manner different than similar key performance indicators used by other companies.

Customer Locations. "Customer Location" means a billing customer location for which the term of services has not ended, or with which we are negotiating a renewal contract. A single unique customer can have multiple Customer Locations including physical and eCommerce sites.

Gross Transaction Volume. "Gross Transaction Volume" or "GTV" means the total dollar value of transactions processed through our cloud-based SaaS platform in the period, net of refunds, inclusive of shipping and handling, duty and value-added taxes.

Net Dollar Retention Rate. "Net Dollar Retention Rate" is calculated as of the end of each month by considering the cohort of customers on our commerce platforms as of the beginning of the month and dividing our subscription and payments revenue attributable to this cohort in the then-current month by total subscription and payments revenue attributable to this cohort in the immediately preceding month.

In some cases, forward-looking information can be identified by the use of forward-looking terminology such as "plans", "targets", "expects" or "does not expect", "is expected", "an opportunity exists", "budget", "scheduled", "estimates", "outlook", "forecasts", "projection", "prospects", "strategy", "intends", "anticipates", "does not anticipate", "believes", or variations of such words and phrases or statements that certain actions, events or results "may", "could", "would", "might", "will", "will be taken", "occur" or "be achieved", the negative of these terms and similar terminology. In addition, any statements that refer to expectations, intentions, projections or other characterizations of future events or circumstances contain forward-looking information. Statements containing forward-looking information are not historical facts but instead represent management's expectations, estimates and projections regarding future events or circumstances.

Forward-looking information is necessarily based on a number of opinions, estimates and assumptions that we considered appropriate and reasonable as of the date such statements are made, are subject to known and unknown risks, uncertainties, assumptions and other factors that may cause the actual results, level of activity, performance or achievements to be materially different from those expressed or implied by such forward-looking information, including but not limited to the risk factors identified in our most recent Management's Discussion and Analysis of Financial Condition and Results of Operations and under "Risk Factors" in our most recent Annual Information Form, both of which are available under our profile on SEDAR at www.sedar.com. If any of these risks or uncertainties materialize, or if the opinions, estimates or assumptions underlying the forward-looking information prove incorrect, actual results or future events might vary materially from those anticipated in the forward-looking information.

Although we have attempted to identify important risk factors that could cause actual results to differ materially from those contained in forward-looking information, there may be other risk factors not presently known to us or that we presently believe are not material that could also cause actual results or future events to differ materially from those expressed in such forward-looking information. There can be no assurance that such information will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information. No forward-looking statement is a guarantee of future results. Accordingly, you should not place undue reliance on forward-looking information, which speaks only as of the date made. The forward-looking information contained in this news release represents our expectations as of the date of hereof (or as of the date they are otherwise stated to be made) and are subject to change after such date. However, we disclaim any intention or obligation or undertaking to update or revise any forward-looking information whether as a result of new information, future events or otherwise, except as required under applicable securities laws. All of the forward-looking information contained in this news release is expressly qualified by the foregoing cautionary statements.

Condensed Consolidated Statements of Loss and Comprehensive Loss

(expressed in thousands of US dollars, except per share amounts)

Fiscal yearended March 31,

Three monthsended March 31,

2020

2019

2020

2019

$

$

$

$

Revenues

120,637

77,451

36,271

21,285

Direct cost of revenues

43,199

23,573

13,595

6,962

Gross profit

77,438

53,878

22,676

14,323

Operating expenses

General and administrative

24,486

13,790

7,350

4,793

Research and development

31,812

18,283

10,100

5,074

Sales and marketing

55,388

39,043

15,239

11,362

Depreciation of property and equipment

1,749

1,389

550

415

Depreciation of right-of-use assets

2,492

—

821

—

Foreign exchange loss (gain)

(395)

987

(300)

637

Acquisition-related compensation

11,087

454

5,138

188

Amortization of intangible assets

9,226

3,148

4,260

649

Total operating expenses

135,845

77,094

43,158

23,118

Operating loss

(58,407)

(23,216)

(20,482)

(8,795)

Fair value loss on Redeemable Preferred Shares

—

(191,219)

—

(132,135)

Interest income net of interest expense

1,766

181

(226)

81

Loss before income taxes

(56,641)

(214,254)

(20,708)

(140,849)

Income tax expense (recovery)

Current

49

59

(46)

64

Deferred

(3,159)

(30,788)

(2,065)

(44,837)

Total income tax expense (recovery)

(3,110)

(30,729)

(2,111)

(44,773)

Net loss

(53,531)

(183,525)

(18,597)

(96,076)

Other comprehensive loss

Items that may be reclassified to net loss

Foreign currency differences on translation of foreign operations

(6,271)

—

(6,271)

—

Total comprehensive loss

(59,802)

(183,525)

(24,868)

(96,076)

Net loss per share – basic and diluted

(0.62)

(5.53)

(0.21)

(2.21)

Condensed Consolidated Balance Sheets

(expressed in thousands of US dollars)

2020

2019

Assets

$

$

Current assets

Cash and cash equivalents

210,969

207,703

Trade and other receivables

10,879

8,424

Inventories

932

269

Other current assets

10,427

5,204

Total current assets

233,207

221,600

Lease right-of-use assets

15,957

—

Property and equipment, net

7,989

5,372

Intangible assets, net

62,819

2,618

Goodwill

146,598

22,536

Restricted cash and other long-term assets

11,749

3,499

Deferred tax assets

109

186

Total assets

478,428

255,811

Liabilities and Shareholders' Equity

Current liabilities

Accounts payable and accrued liabilities

30,810

16,183

Lease liabilities

3,301

—

Income taxes payable

76

135

Current portion of deferred revenue

36,622

32,317

Total current liabilities

70,809

48,635

Deferred tax liabilities

6,578

706

Deferred revenue

5,472

8,025

Lease liabilities

13,546

—

Long-term debt

29,687

—

Other long-term liabilities

8,198

1,779

Total liabilities

134,290

59,145

Shareholders' equity

Share capital

852,115

652,336

Additional paid-in capital

11,773

4,278

Accumulated other comprehensive loss

(6,271)

—

Accumulated deficit

(513,479)

(459,948)

Total shareholders' equity

344,138

196,666

Total liabilities and shareholders' equity

478,428

255,811

Condensed Consolidated Statements of Cash Flows

(expressed in thousands of US dollars)

2020

2019

$

$

Cash flows from (used in) operating activities

Net loss

(53,531)

(183,525)

Items not affecting cash and cash equivalents

Acquisition-related compensation

11,087

454

Fair value loss on Redeemable Preferred Shares

—

191,219

Amortization of intangible assets

9,226

3,148

Depreciation of property and equipment and lease right-of-use assets

4,241

1,389

Deferred income taxes

(3,159)

(30,788)

Stock-based compensation expense

8,870

1,693

Unrealized foreign exchange loss (gain)

475

929

(Increase)/decrease in operating assets and increase/(decrease) in operating liabilities

Trade and other receivables

2,071

(546)

Inventories

(401)

(31)

Other assets

(3,440)

(335)

Accounts payable and accrued liabilities

(1,329)

5,647

Income taxes payable

(59)

(9)

Deferred revenue

(433)

3,309

Other long-term liabilities

(402)

71

Interest income net of interest expense

(1,766)

(181)

Total operating activities

(28,550)

(7,556)

Cash flows from (used in) investing activities

Additions to property and equipment

(3,609)

(2,030)

Payment of liabilities related to acquisition of business

(5,116)

—

Acquisition of businesses, net of cash acquired

(115,048)

(1,389)

Interest income

3,480

—

Total investing activities

(120,293)

(3,419)

Cash flows from (used in) financing activities

Proceeds from exercise of stock options

3,546

536

Proceeds from issuance of share capital

130,933

207,547

Proceeds from draw-down of long-term debt

30,000

—

Share issuance costs

(6,893)

(12,372)

Payment of lease liabilities and movement in restricted deposits

(3,401)

—

Financing costs

(653)

—

Repurchase of Common Shares

—

(792)

Total financing activities

153,532

194,919

Effect of foreign exchange rate changes on cash and cash equivalents

(1,423)

(892)

Net increase in cash and cash equivalents during the year

3,266

183,052

Cash and cash equivalents – Beginning of year

207,703

24,651

Cash and cash equivalents – End of year

210,969

207,703

Interest paid

320

26

Income taxes paid

113

124

Reconciliation from IFRS to Non-IFRS Results

Fiscal yearended March 31,

Three monthsended March 31,

(In thousands of US dollars)

2020

2019

2020

2019

$

$

$

$

Net loss

(53,531)

(183,525)

(18,597)

(96,076)

Fair value loss on Redeemable Preferred Shares(1)

—

191,219

—

132,135

Stock-based compensation and related payroll taxes(2)

9,930

3,110

2,676

2,043

Depreciation and amortization(3)

13,467

4,537

5,631

1,064

Foreign exchange loss (gain)(4)

(395)

987

(300)

637

Interest income net of interest expense(3)

(1,766)

(181)

226

(81)

Acquisition-related compensation(5)

11,087

454

5,138

188

Transaction-related expenses(6)

2,658

1,023

1,159

718

Income tax recovery

(3,110)

(30,729)

(2,111)

(44,773)

Adjusted EBITDA

(21,660)

(13,105)

(6,178)

(4,145)

(1)

This loss is with respect to the change in valuation of our Redeemable Preferred Shares from period to period, which is a non-cash item. Prior to the completion of our initial public offering on March 15, 2019, all of our Redeemable Preferred Shares were converted and the liability was reduced to $Nil with a corresponding increase in share capital. There will be no further impact on our results of operations from these shares.

(2)

These expenses represent non-cash expenditures recognized in connection with issued stock options and other awards under our stock option plans to our employees and directors as well as related payroll taxes given that they are directly attributable to stock-based compensation, are estimates and therefore subject to change. For the three months and fiscal year ended March 31, 2020, the stock-based compensation expense was $4,060 and $8,870 respectively (March 31, 2019 - $706 and $1,693) and the related payroll taxes were a recovery of $1,384 and an expense of $1,060 respectively (March 31, 2019 - expense of $1,337 and $1,417).

(3)

In connection with the adoption of IFRS 16 - Leases, on a modified retrospective basis, with no restatement of comparatives, for the three months ended March 31, 2020, net loss includes depreciation of $821 related to amortization of right-of-use assets, interest expense of $246 on lease liabilities, and excludes an amount of $954 relating to rent expense ($2,492, $852, and $2,894 respectively for the fiscal year ended March 31, 2020).

(4)

These non-cash losses (gains) relate to foreign exchange translation.

(5)

These costs represent a portion of the consideration paid to acquired businesses that is associated with the ongoing employment obligations for certain key employees of such acquired businesses.

(6)

These expenses relate to professional, legal, consulting and accounting fees relating to our initial public offering, our acquisitions, our secondary offering in August 2019 and our bought deal in February 2020 that would otherwise not have been incurred.

Reconciliation from IFRS to Non-IFRS Results

The following table outlines stock-based compensation and the related payroll taxes as well as transaction-related costs associated with the Company's acquisitions and capital raises included with these expenses included in the results of operations.